Shriram City Union Finance Limited - Karvy

As on March 31, 2011, 24 % of our Assets Under Management were represented by loans to the smallenterprises segment. In recognition of the contribution and vast potential of the small enterprises financesector in the economy, provision of adequate credit to this sector continues to be an important element ofbanking policy, particularly after the initiation of structural reforms in 1991. According to the Ministry ofFinance, Government of India, small and medium enterprises sector contribute about 40% of totalmanufacturing and 34% of total exports and is crucial to India's economic growth, employment generationand entrepreneurial development, (Source: Ministry Website). The Government of India has from time totime taken economic policy initiatives to promote this sector and enhance credit to small and mediumenterprises. Some of the initiatives of the Government towards MSME financing include setting up ofcredit guarantee fund trust for small industries, risk sharing facility, venture capital funding, micro credit,etc. The small enterprises finance sector currently is catered to largely by public sector banks, publicfinancial institutions and local unorganized private financiers.Any change in statutory and/or regulatory requirements in connection with the small enterprises financesector, change in government policies, slow down in liberalization and reforms affecting the sector couldaffect the performance of small enterprises, which would affect the demand for finance in this sector, whichin turn would affect the results of our operations from loans to the small enterprises finance sector.Further, progressive reforms, policy, statutory and/regulatory provisions in connection with the sector couldenable easier access to finance to small enterprises from banks, NBFCs and other financial institutionswhich in turn could result in increased competition for our Company in relation to loans issued to smallenterprises. Our inability to manage such competition could adversely affect our results of operations fromloans to the small enterprises finance sector.46. Increase in competition from our peer group in the finance sector may result in reduction of our marketshare, which in turn may adversely affect our profitability.We have been increasingly facing competition from domestic and foreign banks and NBFCs in each of ourlines of businesses. Some of our competitors are very aggressive in underwriting credit risk and pricingtheir products and may have access to funds at a lower cost, wider networks and greater resources than ourCompany. Our financial condition and results of operations are dependent on our ability to obtain andmaintain low cost funds and to provide prompt and quality services to our customers. If our Company isunable to access funds at a cost comparable to or lower than our competitors, we may not be able to offerloans at competitive interest rates to our customers.While our Company believes that it has historically been able to offer competitive interest rates on theloans extended to our customers, there can be no assurance that our Company will be able to continue to doso in the future. An increase in competition from our peer group may result in a decline in our marketshare, which may in turn result in reduced incomes from our operations and may adversely affect ourprofitability.47. Our growth depends on the sustained growth of the Indian economy. An economic slowdown in Indiaand abroad could have a direct impact on our operations and profitability.Macroeconomic factors that affect the Indian economy and the global economic scenario have an impact onour business. The quantum of our disbursements is driven by the growth in demand for vehicles, capital bysmall enterprises and loans by individuals. Any slow down in the Indian economy may have a direct impacton our disbursements and a slowdown in the economy as a whole can increase the level of defaults therebyadversely impacting our Company’s profitability, the quality of its portfolio and growth plans.48. Political instability or changes in the government could delay further liberalization of the Indianeconomy and adversely affect economic conditions in India generally, which could impact our business.17